Washington, D.C. – The U.S. government may provide the domestic automakers with US$15 billion in financial aid, but will demand restructuring and proof of viability that must be evident by March 31, 2009. General Motors, Ford and Chrysler combined had requested up to $34 billion. U.S. Speaker Nancy Pelosi and Chairman Barney Frank of the House Financial Services Committee held a press conference yesterday to announce the ongoing negotiations.
“It is an interest that is important to our economy, to our industrial base, the workforce concerns that are important to our country,” Pelosi said at the conference. “We want to be able to review the performance of the auto companies as we go forward. In order to do that, it is important for us to pass legislation that will set criteria for restructuring and reorganization of that industry and the companies within it. It is important to note that unless the restructuring that is called for in this legislation and the goal of viability is achieved by March 31, there is no justification for spending any more taxpayer dollars.”
Representatives had asked President Bush to provide limited, temporary assistance to the automakers under the Troubled Assets Relief Program (TARP), but Pelosi said at the conference that the President had refused. “We should be able to use TARP funds, but the White House doesn’t want to do that, so we have to use funds that are designated for a different purpose that is riskier,” she said. “We can’t spend as much money, and this is why it is $15 billion. It may take more than $15 billion to get to March 31. But come March 31, it is our hope that there will be a viable automotive industry in our country with transparency and accountability to the taxpayer. We think that is possible. But if they don’t meet the conditions of restructuring, there is not going to be an endless flow of money to this industry, left to their own devices and the practices they have engaged in.”
Several representatives had suggested that the aid be dependent on the current CEOs of the three companies stepping down. In a statement, Lee Iacocca, former Chrysler chairman and CEO, and former president of Ford, said that this would be a very poor idea.
“Running a multi-billion-dollar automobile company with thousands of employees, retirees, suppliers, dealers and communities counting on you is not for the weak of heart, or for the timid or the untried. Especially the untried,” Iacocca said. “Having been there, I do not agree with the sentiment now coming out of Congress that the management should be changed as a condition of granting loans to the Detroit automakers. You don’t change coaches in the middle of a game, especially when things are so volatile. The industry has been brutalized by a totally unpredictable series of events over which it had little control and that is beating it unmercifully into the ground.
“The companies may not be perfect, but the guys who are running them now are the only ones with the experience and the in-depth knowledge and understanding of how the car business really works. They’re by far the best shot we have for success. I say give them their marching orders and then let them march. They’re the right people to get the job done.”